Bloomberg News

S&P 500 Near 1,400 on Better-Than-Estimated Economic Data

March 15, 2012

U.S. stocks advanced, after the Standard & Poor’s 500 Index topped 1,400 for the first time in almost four years, as data showed manufacturing in the New York region unexpectedly increased and jobless claims declined.

Financial (S5FINL) and industrial companies rose the most among 10 groups in the S&P 500 as Bank of America Corp. and General Electric Co. added at least 1.3 percent. The Dow Jones Transportation Average, a proxy for economic growth, gained 3.4 percent as CSX Corp. (CSX) surged 7.4 percent. International Business Machines Corp. rallied a seventh straight day to a record.

The S&P 500 added 0.4 percent to 1,399.96 at 2:13 p.m. New York time, after briefly topping the median 2012 strategist estimate of 1,400. The Dow Jones Industrial Average advanced 25.89 points, or 0.2 percent, to 13,219.99, gaining for a seventh day, the longest winning streak in 13 months. About 4.8 billion shares changed hands on U.S. exchanges.

“It’s been a smooth ride this year,” Russ Koesterich, the San Francisco-based global chief investment strategist for the IShares unit of BlackRock Inc., said in a phone interview. His firm oversees $3.51 trillion as the world’s largest asset manager. “The economy is doing better than people thought. The corporate sector has remained very profitable. Valuations are reasonable. The buying is justified.”

The S&P 500 is on pace for the best first quarter since 1998 (SPX), after rallying 11 percent, amid better-than-estimated economic and corporate reports. The index trades at 14.5 times reported earnings, the highest valuation level since July and below the average since 1954 of 16.4 times earnings.

Economic Data

Equities rose as manufacturing in the New York region expanded in March at the fastest pace since June 2010. Claims for jobless benefits fell last week, matching the lowest level in four years, more evidence the labor market is improving. Separate data showed that the Federal Reserve Bank of Philadelphia’s general economic index increased to 12.5 in March from 10.2 last month, beating economists’ estimates.

“The U.S. economic numbers are quite encouraging,” Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co., said in a telephone interview. “Stocks have reached new highs, but valuations are reasonable. People who haven’t gotten into the market might be drawn in because the economy is improving and there are some relative good values out there.”

Companies most-tied to economic growth led the gains in the S&P 500. The Morgan Stanley (MS) Cyclical Index of companies advanced 1.4 percent. The KBW Bank Index (BKX) rallied 2.6 percent as all of its 24 stocks advanced.

Banks, GE

Bank of America gained 3.7 percent to $9.17. JPMorgan Chase & Co. (JPM) increased 2.5 percent to $44.67. GE added 1.3 percent to $20.04.

A measure of transportation shares in the S&P 500 had the biggest gain among 24 industries, adding 3.2 percent. The Bloomberg U.S. Airlines Index jumped 3.9 percent. FedEx Corp. (FDX) increased 2.7 percent to $94.70. CSX climbed 7.4 percent, the most in the S&P 500, to $21.71.

Technology shares, which comprise more than 20 percent of the S&P 500, swung between gains and losses. IBM (IBM) advanced to a new record, adding 0.4 percent to $205.47. Apple Inc. (AAPL) fell 1.6 percent to $580.16, after climbing above $600 for the first time earlier today.

Advanced Micro Devices Inc. (AMD) gained 5.7 percent to $8.20. The second-largest maker of processors for personal computers was moved to buy from hold at Jefferies, which increased the 12- month price estimate to $10.50 from $7.

Children’s Books

Scholastic Corp. (SCHL) surged 13 percent to $36.26. The children’s book publisher boosted its full-year forecast, saying it now expects to earn at least $2.60 a share from continuing operations. The company had projected $2.10 at most.

Nucor Corp. (NUE) fell 1.8 percent to $43.10. The largest U.S. steelmaker by market value forecast first-quarter profit that missed analysts’ estimates after an increase in imports and domestic production.

EBay Inc. (EBAY) slumped 2.2 percent to $36.79. The largest Internet marketplace was downgraded to neutral from outperform at Credit Suisse Group AG.

Guess? Inc. (GES) tumbled 10 percent, the most in the Russell 1000 Index, to $32.96. The clothing retailer forecast fiscal 2013 earnings of no more than $2.65 a share, below the average analyst estimate of $3.16 a share, according to a Bloomberg survey.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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